Despite the decline in the stock market since its peak back in April 2010, many investors are still short a number of stocks, betting that the carnage may continue for the balance of 2010 and into 2011. These short bets cross sector lines and include stocks in the energy, financial, technology and consumer areas.
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- GMX Resources (Nasdaq:GMXR)
This exploration and production company has properties in Texas that are prospective for the Haynesville Shale. The stock traded as high as $19 a share only a year ago, and peaked in the mid $70 range during the boom years. Although the stock trades for only $4.68 per share now, 27% of the outstanding float is still sold short.
Investors seem to be concerned that GMX Resources is still pursuing natural gas development despite the current rage for liquids and oil development. Also, most analysts had the company outspending its cash flow over the next few years due to low prices for natural gas and an aggressive development program.
The company took a step toward changing this view through cutting capital expenditures by $50 million in 2011 and 2012, and sub leasing one of its contracted land rigs, which will save $22 million through 2013.
- P.F. Chang's China Bistro (Nasdaq:PFCB)
PFCB is selling close to a four year high, and is closing in on its all time high near $60 per share reached in 2005. This may explain why 26% of the outstanding float is sold short. The company reported results for the second quarter of 2010 at the end of July 2010, and had a profitable quarter although earnings were just shy of consensus.
Although the company reaffirmed its outlook on business for the year, investors seem to be betting that the weak economy might eventually catch up to this stock, and send the price plunging. There is also a concern regarding an increase in food prices, which might increase costs for restaurants and food companies.
- Alliance Data Systems (NYSE:ADS)
Alliance has 33% of its float sold short. The company is in the private label credit card business and just reported the performance of its portfolio for July 2010. The company had net charge offs as a percent of average receivable of 8.6% for the month, along with a delinquency rate of 5.7%. There is also concern that new rules for late fees on credit cards will cut revenues for Alliance Data Systems and other companies that rely on these fees.
- Blackboard (Nasdaq:BBBB)
This company sells software applications to the education industry, and reported second-quarter earnings earlier in the month. Although the company beat estimates, it lowered its outlook for the third quarter and full year, and investors may be expecting further downward earnings revisions. The company has 35% of its float sold short.
The Bottom Line
Many investors still expect stocks to decline, and are making major short bets on individual stocks across various sectors. (For related reading, take a look at Short Interest: What It Tells Us.)
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